Any investor considering purchasing intellectual property (IP) rights from a distressed company should consult an experienced attorney.

1. Buying Distressed IP Assets - The
Importance of Due Diligence
By Suzzanne Uhland

2. Intellectual Property Rights
● Any investor considering purchasing
intellectual property (IP) rights from a
distressed company should consult an
experienced attorney. While such
acquisitions may appear to represent a
bargain, potential purchasers will need to
examine the particulars carefully.

3. ● Both the asking price of the asset and the
extent to which it will be integrated into the
buyer’s business should determine the
degree of due diligence required, as well as
how clear the title to such an asset should
be.
Due Diligence

4. Examples
● Even with a low selling price, if an electronic
IP asset, for example, is slated to become
part of the purchaser’s existing information
technology network to such an extent that its
removal would seriously impact the
business, the purchaser must exercise
extreme caution in obtaining a clear title.
● On the other hand, a suite of office furniture
would be considered a much less risky asset
because it could be easily replaced.

5. Other Considerations
● A potential purchaser should perform a
careful check of the seller’s financial records
to determine whether any liabilities may
attach to the asset being purchased.
● Buyers should also know the type of
bankruptcy status under which a seller is
operating, as federal bankruptcy, creditor
assignment, and “workout” proceedings
produce differing effects on the business.